The role of heat waves and droughts on regional EU economies
Sarah Spiteri & co-authors
Heat waves and droughts pose growing risks to regional economic stability in the EU, requiring climate aware nowcasting tools for climate policy-relevant sectors. Applying machine learning (ML) models (Random Forest and XGBoost) to mixed-frequency climate and economic indicators from 1,117 NUTS-3 regions between 2002 and 2022, this study demonstrates that predictions of real gross value added (GVA) growth is significantly improved with climate-augmented ML models, particularly in agriculture. A complementary simulation exercise quantifies the predictive contributions of concurrent extreme weather events to regional economies, revealing that agriculture could occasionally face yearly GVA growth reductions of up to –10 percentage points in Northern and Central Europe. Conversely, the broader industrial sector shows moderate simulated losses and manufacturing remains largely resilient. These findings underscore asymmetric vulnerabilities between sectors and regions and the value of predictive modelling for climate adaptation policy.
The article, entitled "The Role of Heat Waves and Droughts on Regional EU Economies", authored by Ms Sarah Spiteri and co-authors, is featured on pages 53-75 (2026) of 
IFC Bulletin No. 68 on "Sustainability data issues and central banks' experience. The article can be accessed 
here.